Jan. 4 (Bloomberg) -- China’s yuan forwards declined by the
most in two weeks after the Federal Reserve indicated it will
probably end its bond-buying program this year.

The People’s Bank of China weakened the reference rate by
0.07 percent, the most since Nov. 28, to 6.2897 per dollar. The
yuan is allowed to trade as much as 1 percent on either side of
the daily fixing. Fed members were divided between a mid- or
end-of-year finish to the $85 billion a month of debt purchases,
known as quantitative easing, according to minutes of last
month’s meeting that were released yesterday in Washington.

“The minutes spurred speculation the Fed may end QE3 at an
earlier time than expected, which will help prevent an increase
in dollar supply in the market,” said Liu Dongliang, a senior
analyst in Shenzhen at China Merchants Bank Co., the nation’s
sixth-biggest lender.

Twelve-month non-deliverable forwards dropped 0.09 percent
to 6.3195 per dollar as of 4:56 p.m. in Hong Kong, a 1.4 percent
discount to the onshore spot rate, according to data compiled by
Bloomberg. That was the biggest decline since Dec. 21. The
contracts strengthened 0.26 percent this week.

The yuan traded at 6.2303 in Shanghai, unchanged from the
close on Dec. 31, according to the China Foreign Exchange Trade
System. Mainland financial markets have been shut for the last
three days for public holidays. One-month implied volatility, a
measure of expected moves in exchange rates used to price
options, declined six basis points, or 0.06 percentage point, to
1.45 percent, according to data compiled by Bloomberg.

In Hong Kong’s offshore market, the yuan fell 0.14 percent
to 6.2145 per dollar, according to data compiled by Bloomberg.
That was the biggest drop since Dec. 21.